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Income Tax Provisions Applicable from 1st June 2016

Income Tax Provisions Applicable from 1st June 2016

(i)         Amendment relating to Advance Tax (The change is effective from financial year 2016-17 onwards)

The schedule for payment of Advance Tax by an Individual and other non-corporate assessee has been amended w.e.f.  1st June 2016 as under:

Due Date of Installment
Amount Payable
On or before 15th June
15% of Advance Tax
On or before 15th September
45% of Advance Tax
On or before 15th December
75% of Advance Tax
On or before 15th March
100% of Advance Tax

Earlier, there was no requirement of paying advance tax in respect of assessees’ who opted for non maintenance of books of accounts and declared profit @8% of gross receipts subject to a maximum of Rs. 1 crore which limit has been enhanced to Rs. 2 crores w.e.f. financial year 2016-17.

In case of such assesses’ (whose businesses are eligible for applying tax @8% on gross receipt) under section 44AD of the Act are also now required to pay 100% of the tax due on such income before 15th March, from financial year 2016-17 onwards.

(ii)           Amendments relating to TDS and TCS

(a)          Increase in threshold limit of deduction of tax at source on various payments mentioned in the relevant sections of the Act


Threshold Limit upto 31st May 2016 (Rs.)
Threshold Limit from 1st June 2016 (Rs.)
192A Payment of accumulated balance due to an employee by the trustees of the Employees Provident Fund Scheme , 1952
194BB Winnings from Horse Race
194C Payments to Contractors
Aggregate annual limit of  75000
Aggregate annual limit of  100000
194LA Payment of Compensation on acquisition of certain Immovable Property
194D Insurance commission
194G Commission on sale of lottery tickets
194H Commission or brokerage

(b)  Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act :-

TDS Rates  up to 31st May 2016 TDS (%)
TDS  Rate w.e.f.  1st June 2016 (%)
194DA Payment in respect of Life Insurance Policy
194EE Payments in respect of NSS Deposits
194D Insurance commission
194G Commission on sale of lottery tickets
194H Commission or brokerage

(c)          Regarding : TCS on sale of Vehicles; Goods or services  :-

The following modifications have been made in the scheme of tax collection at source given under section 206C (with effect from 1st June , 2016) –

Sub-section (1F) has been inserted.

This sub-section provides that every person (being a seller who receives any amount as consideration for sale of motor vehicle of value exceeding Rs. 10,00,000 shall collect the tax at the rate of 1 per cent of sale consideration .

This will be applicable whether payment is made by the purchaser in cash or by the issue of a cheque or draft or by any other mode.

Under the existing provisions of sub-section (1D) , seller of bullion (exceeding Rs. 2 lakhs) or jewellery (exceeding Rs. 5 lakhs)  is required to collect tax at source, if the consideration (or any part of it) is received in cash. In such case, tax was required to be collected at the rate of 1 per cent of sale consideration.

New provision

The requirement of collection of tax at source @ 1% from the buyer of goods or services exceeding Rs. 2 lacs has become effective from 1st June, 2016 in case the transaction of purchase of goods or provision of services exceeds Rs. 2 lacs in part or fully is received in cash in case of a single invoice

To illustrate in case a purchase of Rs. 2,50,000/- is made through a single invoice and the buyer pays Rs. 1,50,000/- by cheque and Rs. 1 lac in cash the provision would be attracted and the seller would have to collect 1% of Rs. 2,50,000/-. 
However, provisions of sub-section (1D) will not be applicable in the following 2 cases –

(a)    No tax shall be collected at source on any amount on which tax has been deducted by the payer as applicable.

(b)    Provision of sub-section (1D) will not apply in relation to sale of any goods (other than bullion or jewellery) or service to such classes of buyer who fulfill such conditions, as may be prescribed (As yet no condition has been prescribed).

(iii)             Expenses incurred by the assessee towards specified services to be covered under section 40(a)(ib) [W.e.f. 1-6-2016]

A new levy @ 6% (referred to as Equalization  levy) has been made applicable to payment of online advertisements, provision for digital advertising space or any other facility or service for the purpose of online advertisements or any other notified services to a non-resident (who does not have a Permanent Establishment (PE) in India) provided to:

(a)         a resident in India  or
(b)         a non-resident having a Permanent Establishment (PE) in India

Equalization levy is to be deducted by the payer from the amount paid/ payable to the non-resident service provider.

Any consideration paid or payable (to non-resident for a specified service on which equalization levy is applicable) will be disallowed from June 1, 2016 (i.e. this assessment year 2017-18) in the following cases –

(a)   Equalization levy is deductible but such levy has not been deducted.
(b)  Equalization levy is deductible (and it is so deducted) but it is not deposited [on or before the due date of submission of return of income under section 139(1).
If, however, equalization levy is deducted / deposited in a subsequent year, the aforesaid consideration shall be allowed as a deduction in computing the income of the previous year in which such levy has been paid.

(iv)      Enabling of Filing of Form 15G/15H for rental payments [Section 197A]  [1-6- 2016

At present form 15G can be filled up by a resident assessee requesting for non-deduction of tax at source from certain payments made to him if his income is below the tax exemption limit, similarly, form 15H can be submitted by senior citizen ( above 60 years of age and very senior citizen above 80 years of age). The scope of income that can be included in the above forms is as under:

(i)              Amount received from withdrawal from Employees Provident Fund Scheme
(ii)            Dividend Income
(iii)          Interest other than Interest on Securities
(iv)          Sum received from Life Insurance Policy
(v)            Sum received from National Savings Scheme
(vi)           Rental income has also been allowed to be included in the declarations.

(v)        Relief to a non-resident for furnishing PAN [Section 206AA]

Section 206AA, inter alia, provides that any person (who is entitled to receive any sum on which tax is deductible at source) shall furnish his PAN to the deductor, failing which tax shall be deducted at the rate mentioned in the relevant provision or at the rate of 20 per cent, whichever is higher.

Amendment - Which effect from June 1, 2016, sub-section (7) of the said section has been substituted to provide that above provisions shall not apply to a non-resident / foreign company (who does not have PAN) subject to such condition as may be prescribed (as yet not prescribed).

(vi)      Amendment to section 133C

Section 133C empowers the prescribed income-tax authority to issue notice calling for information and documents for the purpose of verification of information in its possession. This section has been amended (with effect from June 1, 2016) to further provide that the information and documents so obtained by the prescribed income-tax authority may be scrutinized and the outcome of such scrutiny may be made available to the Assessing Officer for further necessary action, if any.

Other amendments not covered in detail effective from 1st June 2016 which would be communicated in a separate mail which are being mentioned here under for the sake of information and are as under:-

(vii)        Income Declaration Scheme 2016 - This scheme will be effective from 1 June 2016 (already notified)

In case you have any income to declare you may discuss the same with us . The tax involved is 45% of the amount proposed to be declared and the eligibility for declaration is subject to certain specified conditions.

(viii)      The Direct Tax Dispute Resolution Scheme, 2016

In case you have any appeal proceedings pending before the Commissioner of Income Tax (Appeals) and the issue involved is not entirely in your favour you may decide to opt for said scheme. 


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